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Gold trims weekly losses as US dollar retreats after rally, equities climb

Gold mirrored crude oil’s movement and also got close to Monday’s levels, standing just short of US$1,120/oz on Saturday after slipping below US$1,100/oz during the week amid stronger US dollar.

The US dollar was under pressure on Monday and Tuesday following last week’s move by the Federal Reserve, which hiked the discount rate by 25 basis points to 0.75% to spark speculation that the anticipated monetary policy tightening could come sooner than expected. Gold rallied to US$1,120/oz on the news, however, it fell to US$1,190 later in the week as the American currency strengthened ahead of Ben Bernanke’s testimony to the US Congress, which was expected to clarify the Fed’s hiking of the discount rate and give investors more clues as to the Fed’s near term monetary policy.

The euro remained weak to further pressure precious metals amid concerns over the debt crisis in Greece.

The US dollar remained strong following Bernanke’s speech, in which he reiterated the Fed’s intention not to increase the currently ultra low interest rates, yet offered a somewhat gloomy assessment of the economy, increasing the greenback’s appeal as a safe haven for investors. Gold, which is seen as a riskier investment alternative and moves inversely to the American currency, fell back to US$1,100/oz.

The US dollar weakened after Friday’s recovery in stock markets in the US and Europe, helping gold get closer to US$1,120/oz.

Other precious metals followed with silver and platinum reaching US$16.49/oz and US$1,541/oz.

Base metals also advanced as copper and nickel improved to US$3.27/lb and US$9.54/lb respectively and zinc climbed to US$0.98/lb.

In other news, the World Gold Council (WGC) reported that gold demand fell 11% in tonnage terms 2009 from the exceptional levels of 2008, yet still remained above US$100 billion in dollar terms for the second year in a row. The decline in tonnage masked a progressive recovery in jewellery and industrial demand and resilient investment demand amid uncertainty in global financial and commodity markets.

The identifiable demand in tonnage declined 11% to 233.85.8 tonnes for the full year, while demand in the final quarter dropped 24%, though it marked a 5% year-on-year increase in US$ value terms as the gold price averaged US$1,099/oz, up 38% from Q4 2008.

The recovery in gold prices helped Randgold Resources (LSE: RRS) and peer from the FTSE 250 Petropavlovsk (LSE: POG) trim losses, getting closer to Monday’s levels at the end of the week.

Silver miners Fresnillo (LSE: FRES) and Hochschild Mining (LSE: HOC) recouped about half of their losses on Thursday and Friday.

Platinum producers Lonmin (LSE: LMI) failed to get even halfway back after falling hald during the first half of the week, while midcap Aquarius Platinum (LSE: AQP) performed better, claiming backmost of its losses.

Large and Mid Cap News

Rio Tinto (LSE, ASX: RIO) announced it is expanding the Mine of the Future programme to develop new equipment and systems for deep underground mines. The group has selected three partners to work on the project; Aker Wirth and Atlas Copco will individually work with Rio Tinto to develop two new tunneling concepts and Herrenknecht will work on the development of a new shaft boring machine.

Small Cap News

Forte Energy NL (AIM, ASX: FTE) has reported excellent results from the first batch of laboratory assays taken from the first eight diamond core drill holes at its Bir En Nar uranium project in the Republic of Mauritania, West Africa. The high-grade assays highlighted 16 metres at 1,617 parts per million (ppm) uranium, which included 8 metres at 2,470ppm.

African Diamonds (AIM: AFD) has received the latest valuation of diamonds from its AK6 mine in Botswana, and at US$162 a carat, the valuation exceeds the company’s previous projections. The valuation is US$23 per carat higher than prices used in the current AK6 development studies. The new valuation also indicates the possibility of a US$200 per carat value at production, African Diamonds said.

In its half-yearly report for the six months ended 31 December 2009, Goldplat (AIM: GDP) said it is realising its strategy of becoming a mid-tier gold producer as its Kilimapesa mining operation advances in Kenya towards commercial production. The company’s South African and Ghanaian gold recovery plants are performing well, generating healthy revenues, Goldplat said.

Australian-headquartered Scotgold Resources Ltd (ASX, AIM: SGZ) began trading on London’s AIM market for the first time today. The Perth-based gold explorer is undertaking gold and silver exploration and mining in the Grampian region of central Scotland. Scotgold has supplemented its London listing with the placing of 15.3m new shares at 4.6p, raising £704,000 before expenses.

London-based stockbroker Daniel Stewart said that Prosperity Minerals’ (AIM: PMHL) £300m asset disposal remains on-track, after TCC International (HKG: 1136) shareholders approved the deal. Prosperity’s shareholder vote is seen as a formality and the only remaining risk to the deal will be the completion of due diligence, which the broker understands has been satisfactory to date.

Norseman Gold (ASX, AIM: NGL) said a new ore discovery at the OK Decline mine could substantially increase the reserve of the mine in Australia, while expecting its production to increase steadily in the second half of the current financial year after it failing to meet H1 targets.

In the six months ended 31 December 2009, Medusa Mining Limited (ASX, AIM: MML, TSX: MLL) achieved new company performance records, reporting half-year net profit of US$28.3m, representing a 201% increase from US$9.4m in the corresponding period a year earlier. Revenues grew by 161% to US$41.3m. The emerging gold miner’s record-breaking performance was driven by both increased gold production, lower costs and higher received gold prices, it said.

Solomon Gold (AIM: SOLG) has received high-grade samples, up to 169 grams per tonne (gpt) of gold, from reconnaissance work and systematic stream sampling at the wholly-owned Fauro Island project in Papua New Guinea. Later in the week, the company said that following the completion of the scrip-based acquisitions of Acapulco Mining and Central Minerals and relevant allotments, chief executive Nicholas Mather has a 15.9% stake in the company compared to the 19.1% shareholding he had before the acquisition.

Churchill Mining PLC (AIM: CHL) said it now expects to complete the feasibility review process for its flagship 75 percent held East Kutai coal project (EKCP)  in Indonesia in the second quarter of 2010. It will make a detailed statement on the project's economics and associated matters upon completion of that review.

Broker Fairfax has initiated coverage of Landore Resources (AIM: LND), saying the company’s experienced management team and diversified asset portfolio represented a strong investment case and projecting a continuous news flow this year featuring drill results, resource upgrades and engineering study results on major targets.

London Mining (AIM: LOND) is continuing to deliver development milestones across all four of its key iron ore projects. The AIM-listed mine developer has a busy schedule in 2010 with each of the four projects targeting the next significant development milestone, including a number of feasibility studies and new JORC-resource statements.

African Aura Mining (AIM: AAAM) has commissioned an airborne geophysical survey across its Nkout, Ngoa and Akon iron ore projects in southern Cameroon to define priority targets for a drill programme scheduled for this year.

Australian-listed coal mining and development company Coal of Africa (ASX: CZA, AIM:CZA) has moved to a 100% interest in the Limpopo Coal Company.

Thor Mining (AIM, ASX: THR) is set to acquire the Dundas gold project, which is located in the broader Norseman area south-east of Kalgoorlie in Western Australia. Dundas consists of 3 tenements covering 340km₂ in the Western Australian Goldfields, approximately 100km southeast of Norseman. The proposed deal marks the first step in Thor’s new exploration strategy, which is targeting economically favourable gold prospects rather than base metal projects.

Broker Fairfax issued a note on International Ferro Metals (AIM: IFL) today, projecting the surging ferrochrome prices to push the company back into profit and giving it a 'buy' rating. It also increased the price target to 61 pence compared to the previous target of 59 pence and a market value of around 33.75 pence.

WH Ireland issued a report on Goldplat (AIM: GDP), retaining its 'speculative buy' recommendation for the Africa operating gold and platinum miner and calling it the world’s only fully funded independent exploration junior with large feedstock samples that guaranteed revenue for a number of years.

Avocet Mining (AIM: AVM) has completed the first shipment of gold from its Inata mine in Burkina Faso. The company exported 11,000 ounces of gold to Rand Refinery's facility in South Africa, following Inata’s first pour on 20 December 2009. Proceeds of approximately US$12m are expected to be received next week.

Petra Diamonds (AIM: PDL) has sold the 507 carat Cullinan Heritage diamond for US$35.3m, which is the highest recorded sale price for a rough diamond. Hong Kong based jeweller Chow Tai Fook bought the diamond through a tender process in South Africa.

Herencia Resources (AIM: HER) has commenced a 3,500 metre diamond drill programme at its Paguanta zinc-silver-lead-gold project targeting potential high grade extensions to the known mineralisation after the previous drill programme returned high grade assay results in 2008.

FinnCap said that African Diamonds’ AK6 project in Botswana will be the most lucrative new open pit hard rock diamond project to enter production in the next 10 years. The stockbroker initiated its coverage with a ‘buy’ recommendation, targeting 108p per share. The analyst believes that the recently upgraded top-end diamond valuation, of US$200/carat, could prove to be conservative.

Caledon Resources (AIM: CDN) said coal demand has picked up in the final quarter of 2009 and recovery in prices continued in Q1 2010 after the demand fell earlier in the year amid the economic downturn, impacting coal prices and driving down the company’s revenues.

Minera IRL Limited (AIM: MIRL) has signed an option to purchase the Quilavira gold exploration project in the Tacna district of southern Peru from Ingerieria y Tecnologia Minero-Metalurgica SA (ITMM). The tenements were previously explored by Newcrest Mining (ASX: NCM). The proposed US$50,000 deal is subject to approvals in Peru.

Perth-based exploration and development group Berkeley Resources (AIM, ASX: BKY) have advised the completion of the first stage Mineral Resource Estimates, which has resulted in the doubling of its resource to 52 Mlbs U308 for the Salamanca Uranium Project in Spain.

Pangea Diamondfields (AIM: PDF) received a muted response this morning to news that it would be merging with Oslo listed Swedish exploration and mining group IGE, which is focused diamonds, nickel and gold.

Gemfields (AIM: GEM) announced the discovery of a 6,225 carat emerald at its Kagem mine in Zambia. The emerald was recovered during normal mining operations and it is currently being examined by Gemfields' experts to establish a clearer understanding of its value and significance.

African Aura Mining (TSX-V: AUR, AIM: AAAM) has announced that its 31.8% owned Stellar Diamonds (AIM: STEL) was admitted to trading on the AIM market of the London Stock Exchange today, which injected a fresh £5 million into Stellar.

Mariana Resources Ltd (AIM: MARL) has reported the initial exploration results from its Los Amigos joint venture with Hochschild Mining (LSE: HOC), located in Santa Cruz, Argentina. The company said that encouraging exploration results, including geochemical sampling and an airborne magnetic survey, warrant further exploration on the 13,455 hectares in 2010.

Disclosure: The author holds no positions in the company